Ex-HealthSouth official Ken Livesay to be resentenced for role in fraud

Ken Livesay, who helped perpetrate one of the largest accounting frauds in the history of Wall Street, will stand before a judge Tuesday to receive a "meaningful period of incarceration" as ordered by a federal appeals court.

Ken Livesay (The Birmingham News / Jerry Ayres)

What meaningful means will be determined by U.S. District Judge Karon Bowdre when Livesay appears before a judge for a fourth sentencing. Prosecutors say 12 months is meaningful. Livesay's attorney says three months should be enough to satisfy the appeals court. Either way, he's going to prison.

In November, the 11th Circuit Court of Appeals sent Livesay's case back to Birmingham for resentencing. The appeals court said a sentence of probation for Livesay's role in the HealthSouth scandal is too light.

"Livesay participated in major league economic fraud that injured many individuals, institutions and companies," the appeals court said.

Livesay, 49, pleaded guilty to fraud charges related to the multibillion-dollar fraud at HealthSouth that was discovered in 2003. Sentencing guidelines call for a sentence of 6½ to 8 years. The government recommended a sentence of five years after Livesay's guilty plea. Prosecutors later recommended a 20-month sentence after Livesay testified in the trials of former HealthSouth CEO Richard Scrushy and Hannibal "Sonny" Crumpler, a former vice president and division controller at the company.

Judges, instead, have sentenced Livesay to five years' probation. Livesay also paid a $10,000 fine, forfeited $750,000 and served in-home detention.

Tommy Spina, Livesay's attorney, said in a court filing that the 11th Circuit directed the district judge to give Livesay a "meaningful" term in prison, but did not provide any useful advice in determining what that is.

Spina said Livesay should receive a sentence similar to that of Malcolm McVay, HealthSouth's former finance chief, who served 90 days in prison for signing an earnings statement he knew to be false. McVay had already served the five years of probation and six months of house arrest handed down in his original sentence. Federal prosecutors appealed the probation sentence as being too lenient, and the 11th Circuit sent that case back for resentencing.

Spina said an argument could even be made for a sentence less than three months, given Livesay's extensive cooperation with authorities and his lower rank in the corporate hierarchy.

Livesay's wife and two sons wrote letters to Bowdre asking for a minimal prison sentence. Donna Livesay, Ken Livesay's wife, said she has multiple sclerosis and depends on her husband's income to pay for her medicines.

Patrick Coughlin, a San Diego lawyer suing Scrushy on behalf of shareholders, wrote a letter acknowledging Livesay's role in unraveling the fraud.

Meanwhile, prosecutors are asking that Bowdre send Livesay to prison for a year. A 12-month sentence, Assistant U.S. Attorney George Martin said in a sentencing memorandum, would reflect the seriousness of the crime and promote respect for the law. A 90-day sentence for Livesay is not reasonable, Martin said.

Livesay should be given consideration because of his cooperation with investigators and prosecutors, Martin said. He said the government is recommending a shorter sentence this time because of Livesay's cooperation in the case against former Birmingham City Council member and Jefferson County Commissioner John Katopodis. His testimony in that case, Martin said, was that of a subpoenaed witness and not of a co-conspirator.